Context:
RBI plans to enhance UPI with AI-driven conversational features for user-friendliness and wider adoption.
Artificial Intelligence involves computers or computer-controlled robots performing tasks that typically demand human intelligence and discernment, replicating activities traditionally carried out by humans.
About Fintech:
- Innovative technological solutions aiming to improve and simplify different aspects of financial services.
- Aim–To automate and improve service delivery.
- Encompasses innovations in retail banking, investments, and crypto (DeFi).
- Focuses on boosting financial literacy and education.
- Regulator – Reserve Bank of India.
- Key Facts –
- Valued at 50-60 billion USD in FY20.
- Projected to reach 150 billion USD by 2025.
- Cumulative funding of 27.6 billion USD in the sector.
- India hosts 2,100+ fintechs, with 67% established in the last 5 years.
- India – 3rd largest FinTech ecosystem (following US and UK)
- Components:
- Central Bank Digital Currency (CBDC) – Legal tender issued by a central bank in a digital form.Tokenization – Substituting card details with a distinct code or token.Unified Payments Interface (UPI) – Consolidates multiple bank accounts in one app, enabling instant real-time payments.Digital Banking Units – Specialized hubs with digital infrastructure, providing self-service access to banking products and services in a digital format.
- 3 modes – Neo Banks, Autonomous Units of Traditional Banks, Full Stack Digital Banks.
- Digital Lending – Remote lending via seamless technology for customer acquisition, credit scoring, approval, disbursement, recovery, and support.
- Central Bank Digital Currency (CBDC) – Legal tender issued by a central bank in a digital form.Tokenization – Substituting card details with a distinct code or token.Unified Payments Interface (UPI) – Consolidates multiple bank accounts in one app, enabling instant real-time payments.Digital Banking Units – Specialized hubs with digital infrastructure, providing self-service access to banking products and services in a digital format.
Previous Year Question
Which of the following is a most likely consequence of implementing the Unified Payments Interface (UPI)?
[UPSC Civil Services Exam – 2017 Prelims]
(a) Mobile wallets will not be necessary for online payments.
(b) Digital currency will totally replace the physical currency in about two decades.
(c) FDI inflows will drastically increase.
(d) Direct transfer of subsidies to poor people will become very effective.
